Whenever I interview someone that recently worked at a startup that went out of business I ask them why it failed. How analytically someone answers this question says a lot about them. But the truth is that I'm mostly asking because I'm curious. I want to know what to look out for.

More often than not, the answer comes down to one thing: dysfunctional leadership. More specifically, for some reason, leadership didn't communicate well and couldn't make quick decisions.

The management team of a company is a decision-making and productivity chokepoint. Critical decisions flow through them. If the management team ruminates on most decisions, the company’s progress stalls. In a 100 person startup, five slow-to-decide executives limit the productivity of 95 employees. In a 1000 person startup, the ratio might be 10:990. There’s enormous leverage in a hierarchical organization if the leadership moves quickly. The converse is equally true. Sluggish decision-making halts all progress.

The cost of deciding slowly seems small. Just a day or a week of more research; one more experiment. But a day’s delay in a 1000 person organization costs the company more than $400k in lost productivity.

Slow decision-making can be paralyzing for a company.

Management teams should check themselves occasionally on the speed and quality of their decision-making. It will almost always deteriorate over time. There are dozens of little things that can weigh down management and cause them to slow the pace -- too many direct reports, too many meetings, not enough meetings, new personalities, fear of telling the truth, personal issues, different communication styles, poor prioritization and on and on. All of these things will come up at some point. How well a leadership team weeds through this stuff and finds a way to continue to make good, speedy decisions might make the difference.

Joining a tech startup for the first time is extremely difficult. If you’ve come from a big public company or a non-profit or the public sector it can feel really unnatural and even uncomfortable. The way you’ve operated in the past likely won’t work. Things will feel weird.

I’ve had the luxury of working in five different tech startups and have been in a position to see trends around the things successful people do and the things the not so successful people do. Here's some advice based on what I've seen over the years. I hope it’s helpful for people that are joining a tech startup for the first time.

Be incredibly good at dealing with change. Depending on the number of employees in the startup, headcount can literally double in a month or even a couple of weeks. The number of customers serviced can double. Cash in the bank can grow by 1000x. A crucial employee can quit. A major customer can cancel. Because startups are small, change and its impact can feel radical. The company can become a different company in an instant. This is a strange thing. This doesn't happen in a normal company. In addition, in the early days, a startup is really just a hypothesis about solving a problem. And the way that the company is solving the problem will change constantly. For the employee, this means they are likely to have different bosses and jobs and roles and projects in a short amount of time. Learn to enjoy and thrive in this change.

In your first 90 days do something awesome. When you join a startup, because of its small size, you’re going to have a lot of eyes on you — particularly from people that can make decisions about your future. Find a way to impress them. Take ownership of a project or a sale or a product or a process improvement and dive in deep and make it great. Be transparent about what worked and what didn’t. You’ll find that failure is generally not frowned upon and learning is highly valued. Doing something awesome is not necessarily easy. It’s not going to come to you. Have zero expectation that someone is going to set you up for success. Go get it and make it happen.

Avoid playing politics. In larger companies, to get ahead you have to play the political game. This is much less true in startups. In a large successful company an employee can do nothing and play politics and the damage to the company is non-existent. The great employees aren’t playing this game and if you are you’ll stand out. People will pick up on it and you’ll get a reputation as someone that is political and it’ll be hard to shake. Get stuff done and be transparent about your success and learning. The downside of a startup is sometimes if one person doesn’t like you it can hold you back because there isn’t a defined system to move you forward. This is why you should avoid playing politics because it’s a quick way to get people that matter to not like you. The way to be liked is to produce results and share what you're learning.

Think short term and long term. This is one of the hardest things to do. It's not natural but it's necessary. The main thing that is going to get you ahead is your ability to produce short-term results and to be transparent about those results (and your learnings). You have to think short-term and show weekly if not daily progress. But you also want to have a longer-term point of view on your industry and where things are going. Your leadership team is getting paid to predict the future and that's hard to do. They will love the employee that can deliver short-term results but can also act as a thought partner in how the company should be thinking about longer-term strategy.

Make work a very big part of your life. There are times in our lives where we want to focus lots of attention on things outside of work. If you’re going through that time in your life then I’d encourage you not to join a startup. A startup’s cost of capital is generally extremely high. It costs the startup a lot of equity value to raise the capital needed to pay your salary. Because of that, there will be high expectations around your commitment and production. This is a crucial point. It’s simple math. It costs much more for a startup to employ you than it does a big company. And your impact is also greater. If you’re in a 30 person team your contribution, on average, is 1,000 times greater than the same person in a 30,000 person company. The startup is going to rely on you greatly. If you’re uncomfortable with that pressure you’re in the wrong company.

Be humble. It is enormously difficult to effectively operate in startup if you’re not humble. It almost can’t be done. The way you are doing things today is going to change dramatically because it’s not right. Your product isn’t right. Your pricing isn’t right. Your process isn’t right. Your go-to-market isn't right. You have to have a perpetual curiosity about what can be done better, the humility to recognize it can be done better and the willingness to go out and do it better. If you can’t check your ego and do this well you will fail.

Hire people that are better than you. When you’re hiring people there’s a temptation to make sure that you’re not hiring someone that can take your job. Do the opposite. Hire people that can take your job. This may not feel natural but I’ve found over and over again that people that are willing to take this approach win because they build A+ teams and that’s much better than the safety that comes from hiring a B team. A+ teams create exponential value. B teams create linear value and in some cases negative value.

Be insanely commercial. Most startups are not sustainable. If they weren’t taking in outside capital they’d go out of business. Be very aware of this reality. This is not a comfortable situation for the executive team. By definition it’s uncomfortable. Embrace this reality and get onboard with leadership in understanding that it all could come crumbling down. Commercial success is the only thing that matters in the early days.

Challenge yourself to understand context. Because things move so fast and there often isn’t clear ownership and process, decisions made by leadership or other teams may seem dumb. People may seem incompetent. This generally isn’t the case. At one startup I worked in I had the luxury of working closely with the leadership team but I wasn’t on the leadership team. I’d be in the room and see how leadership made decisions and then I’d be out for drinks with my peers and they’d complain about how leadership was clueless and didn't make good decisions. I couldn’t believe what I was hearing. The problem wasn’t that leadership was incompetent, the problem was that my peers lacked the context and lens that leadership was operating under. Challenge yourself to not dismiss seemingly bad decisions as people being uninformed and try to see the decision through the other person’s eyes.

Consider doing the impossible. If you dive into the history of most extremely successful startups they probably did something at some point that seemed impossible. This is true of most major success stories. For some reason, I always think about poker on television. Today, millions of people watch poker on television but there was a time when this was a crazy idea. The reason was that the great players would never agree to have the cameras see their cards during a game. And if the viewer couldn’t see the cards all the drama would be lost. But it was a non-starter with the players. No way. Never going to happen. But some ambitious TV producer saw the opportunity and didn’t accept that reality. He forced it and found a way to get the players to agree and now television poker is a multi-million dollar product. Consider the things that you think are non-starters or are impossible and try to see if you can find a way to break through. Don't be the naysayer. Be the one searching for the solution to the impossible problem. Find a way.

Harry Stebbins had a great interview with venture capitalist Michael Dearing on the 20 Minute VC Podcast a couple weeks ago. Michael talked about a trait that he looks for in founders and startup teams that he refers to as "personal exceptionalism". This is the idea that a person believes that they are special and that their outcomes are going to be "outside the bounds of normal". They’re not arrogant, they just strongly believe that they can produce results far greater than the mean.

This idea really resonated with me; not as an investor but as a person that hires a lot of people and builds teams and is constantly trying to scour through candidates to find the best of the best. The notion of personal exceptionalism really captures what I look for. Rather than try to explain the concept myself I've transcribed Michael's comments on it below. Spot on.

I think my radar for personal exceptionalism has evolved over time but I think the constant is that I’m looking for people who have broken out of the bounds of normal for their peer group. Now that does not [necessarily] mean in business or as technicians or technical talent. It just means that whatever the circumstances were in their lives, that that was not the determining factor. They were able to break out either because they took some crazy personal risk, they took some very sharp left-hand turn, they ended up accomplishing more and seeing more and building a much better experience base because of that risk-taking. So that personal exceptionalism that says that they are special that they are destined for really unique outcomes relative to their peer group. I think that shows up early in somebody’s life and it’s quite independent of pedigree or brand name work experience. In fact, sometimes those things are negatively correlated. But the distinction you make between arrogance and personal exceptionalism is an important one. Personal exceptionalism just means that they see themselves as special and their outcomes are going to be outside of the bounds of normal. I think that they a lot of times are some of the most self-critical people I know and they beat themselves up when they do miss a goal or they fail in a venture they beat themselves up far harder than any third party could so the arrogance piece is easy to suss out. You see it in the form of the people they attract around them and the kinds of networks that they build how much are they are a taker versus a giver in those networks. So I actually have found over the years it’s relatively easy to separate the sheep from the goats.

He noted that the longer a company operates the more commitments it inevitably makes to its various stakeholders (customers, vendors, employees, partners). As these commitments pile up it becomes more difficult for the company to adapt to changing market conditions (to stay ahead of disruptors, respond to changing customer tastes, pursue new product opportunities, etc.). At the extreme, the company becomes virtually paralyzed and unable to innovate.

This is a much more accurate explanation of why it's difficult for big companies to innovate than the old notion that these companies get successful and turn incompetent or arrogant. To the contrary, they're actually quite competent and humble -- they're simply trying to honor the commitments they've made to various stakeholders over the years. On the surface this is a good thing. But when you look more closely you see that companies will eventually become nothing but a product of their past commitments made at a different time by different people with a different context. Stagnation is inevitable.

This point really resonated with me. Whenever I speak to a job candidate that's working with a company that's struggling they almost always explain the company's problem as some version of the 'commitment problem'. There's a great lesson in here for startups. When a startup finds itself making painful decisions only to honor past commitments, it's worth pausing and ensuring that those commitments are consistent with what's needed in the moment and what's best for the company in the long-term. Unraveling commitments that were made in the early days can be extremely challenging, especially for startups that rely on their early customers to fuel growth. But at scale too many commitments will lead to a stale product for everyone that's made by a company that may not be around for too long.

A16z had a good podcast the other day talking about startups with network effects and it got me thinking about network effects in enterprise businesses. A product has network effects when the product becomes more valuable as more people use it. Your fax machine was more valuable when more people bought fax machines — you could fax more people. Facebook is more valuable when more of your friends use it -- you can view more photos of your friends.

Businesses with network effects scale exponentially. The reason is that their users effectively become extensions of their sales and marketing team. A Facebook user has an inherent incentive to get other people to use the product. This is a beautiful way to grow and scale a business.

In order to maintain growth, though, these businesses need to ensure that they're retaining the users they acquire -- which is an entirely different challenge. This is relatively easy in B2C because, in theory, the user can be part of the network forever. This is much harder in B2B because users — employees — turnover at the rate of ~20% per year (people get terminated and quit). So in theory, the entire network turns over every five years. And while it's true that often an employee that leaves is replaced by another this kind of churn is not a great way to scale.

That said, some B2B network effect businesses have found ways to retain some users after they change jobs. LinkedIn, Evernote, Wunderlist, Dropbox are a few that come to mind. Not only do these businesses retain their users as they move from job to job, these users also drive new customer acquisition by promoting the product within their new companies (what I refer to as B2E2B). These businesses are seeing network effects drive new users, retention of those users when they move to a new job, and new sales driven by those employees that evangelize the product in their new companies. This how an enterprise business can grow like WhatsApp.

But this isn't easy. Enterprises are concerned about their employees using the same software as they move from company to company -- e.g. they don't want an employee taking their Evernote notes on to their next company. And the product customizations and switching costs may be so high in some cases that the value of the product doesn't translate from one company to another.

The challenges are significant; but the businesses that build an enterprise product with 1.) inherent network effects to drive new users and 2.) the ability for those users to stay engaged with the product as they move from job to job will be the networks that win.

Below is an updated version of a presentation I show to B2B startup teams that are beginning their sales efforts. It's presented here without the context surrounding each of the points but the insights should still be helpful.

I had a good conversation the other day with a former colleague who’s considering making a move to very early-stage startup. I shared with him the list of questions I ask myself before I make a commitment to working with a startup and thought I’d share them here as well.

A quick disclaimer: startups are inherently risky and these five questions aren’t designed to help you avoid a high level of risk. That’s not the point. These questions are designed to help ensure that you understand the risk and make you a bit more comfortable that you’re making a good decision.

Here they are:

Do you have confidence in the people, particularly the leadership team? There’s a great quote from Peter Drucker that I can’t seem to find where he points out that, when a company finally succeeds, more often than not, it will find that it will end up selling a different product at a different price to a totally different set of customers than it initially had planned. The point is that the startup doesn’t have to have the perfect idea or the perfect product to be successful. What they have now probably isn’t right. And that’s ok. What’s important is that you’re working with an ultra-talented team that can iterate and execute like crazy. I’ve written before that the most critical traits for people working in startups are grit, humility, curiosity and adaptability. If you find that the team you’re working with has these traits you’re off to a good start.

Has the founder(s) earned the right to know a secret? If what this startup is doing is so valuable, why isn’t someone else doing it? More often than not the reason is that the founder knows something that other people don’t. Or at least knows how to execute in a way that others don’t. It’s important to be able to understand the secret that the startup knows and to understand why they know it and others don't.

Can the investors/board articulate how the business could be massive and why it’s defensible? Prior to making a jump, when possible, it’s important to talk with some of the investors and board members. This is a good way to test their engagement and confidence in the company and alignment with leadership. Really push them on why they invested. Ask them what they think the core of the business will be and what they think will come after the core. If they can’t confidently articulate this in a way that makes sense it’s a clear red flag.

Can you see yourself being truly passionate about the work you'll be doing? Startups are tough. You’re fighting an uphill battle most of the time and there are lots of highs and even more lows (at least at the beginning). If it's easy then it's not valuable. I’ve found that dealing with the pain of working at a startup is a lot easier when I truly believe and care about the mission of the company. If you don't care about the impact you'll have beyond your own personal benefit then you'll find that the tough days are a lot tougher.

What are 3 reasons it could fail? Again, most startups are long shots. And it’s important to be humble enough to know that you can fail. If you can’t articulate 3 reasons that it could fail, then you either don’t understand the business well enough or you aren’t taking the risk very seriously. Do your diligence such that you understand as many risks as possible and the reasons it might not work out. If after truly understanding the risks and potential pitfalls ahead you really feel like you still want to make the move then you've probably found a good fit.

There’s been a lot of talk in the tech blogosphere over the last couple of weeks about the convergence of private and public valuations. One of the things that hasn’t been talked about all that much is how important this convergence is for employees at early-stage companies.
I was talking to a founder recently and he was telling me that he really struggles with the tradeoff between the importance of showing the world that his company has a unicorn-like valuation versus the importance of keeping his valuation low so that new employees can see lots of value in a follow-on round or an IPO.

On one hand, being a unicorn gets you lots of good press and attention and is for good sales and good for recruiting. On the other hand, a huge valuation makes it hard to deliver value to employees in the form of stock options — if you’re already a unicorn, it’s likely that future employees have missed the big uptick and equity becomes a lot less valuable from a compensation perspective. When you have a potential bubble in the private market and normalcy in the public market, lots of employees are going to find their options are deep underwater. Castlight Health learned this the hard way following their IPO last year (see image below).

Because of the emergence of crowdfunding, angel syndicates, private exchanges, and a lower regulatory bar to invest in early-stage startups, it’s likely that we’ll start to see much more consistency between private valuations and subsequent public valuations. Also, don’t underestimate tools like eShares that help founders manage complex cap tables. I can vividly remember being at a startup where we didn’t want to give out stock options to consultants for no other reason than it would’ve added too much complexity to our cap table. It's a lot easier for a private company to manage thousands of investors than it used to be.

A founder’s desire to push for a massive valuation is perfectly understandable. It creates a buzz that helps recruit employees and close big deals. But when founders push too hard for a private valuation that won't hold up when employees find liquidity, it's bad for the team that built the company in the early years. It's great to see private and public valuations beginning to converge.

Fred Wilson had a great post last week titled, Bootstrap Your Network With A High Value Use Case. He points out how Waze's initial value proposition was to help drivers that like to speed identify speed traps. But it of course quickly expanded way beyond that and now provides lots more value to lots more drivers. It has become mainstream. Same thing with Snapchat -- it started out as a "sexting" app and has now expanded to more applications and is used by the mainstream.
This is sometimes called the "bowling ball strategy" in new product development where you focus on knocking down the first pin by being very focused on one segment and one application and then you gradually knock down more pins (segments & applications) over time until your product works for the mainstream. The idea is to find a narrow niche that loves what you're doing, refine the product and expand from there.

Related to healthcare, this blog has talked a lot about centralizing patient data with the patient, as opposed to multiple medical records across multiple healthcare providers. Most would agree we need to get to this place but the path to getting there isn't terribly clear. Patients aren't clamoring for it yet and there will likely be some resistance from software vendors and healthcare providers as it flies in the face of the strategy of owning the data and, by extension, the patient.

My guess is the way that we're going to get there is similar to the way that Waze built a massive maps business and Snapchat built a massive photo sharing business -- it's going to start with a small niche.

I can see an application that has built a network of highly engaged users with a very specific and highly sensitive medical condition that shares important clinical information back and forth between provider and patient becoming the starting point for consumer-driven patient data. Big software vendors will likely ignore this application because it impacts a small niche and the patients will be highly engaged because their affliction is such an important part of their lives. Once the product is refined it can be extended to other patient segments with other medical conditions and it'll grow from there.

As Chris Dixon likes to say, "the next big thing will start out looking like a toy".

In this case, the next big thing in healthcare technology will start out looking really small: a simple tool that serves a very small, but highly engaged set of patients.

Last week I had a conversation with a founder about how much they should charge their first few customers. Cost plus a fee? Slightly below the incumbent? The same as the incumbent? Some fraction of the estimated ROI?
My answer to this question is pretty simple: charge as much as you can get, charge whatever the market will bear.

At an early stage, a founder's time and focus is the firm's number one asset. Any compromises made in getting less than the absolute maximum amount that a client will pay creates an unrecoverable opportunity cost. Early-stage companies can't afford to not charge what the market will bear.

Pushing for the max more has other benefits. It helps to determine the product's real worth and the real challenges the client is having in buying the product. When pricing makes buying too easy you don't get a good sense of the challenges you'll encounter down the road, you don't get the real story. It also generates a level of respect from the client (we've all heard the stories of people appreciating things more because they cost more regardless of the true value).

Finally, often a startup's instinct will be to charge less because it'll move the deal along faster. This is a myth. The opposite is true. The larger the deal the more attention it will get, the more senior people will need to be involved and it'll move faster as a result.

This post isn't meant to say that you shouldn't negotiate, do a pilot and be flexible where and when it makes sense. You should do all of that. But in lieu of a defined market price, charge a simple one -- the absolute most that you can get.

I've been thinking a lot about this notion of the "interface layer" in web services and how it's changing the economy and the way money flows.
The concept of the "interface layer" is pretty simple. It says that the old economy was about building tangible infrastructure -- cars, buildings, stores, etc. And the new economy is about building really slick and beautiful and easy to use web services (interfaces) on top of that infrastructure;AirBnB for lodging, Uber for ride sharing, OpenTable for restaurants, Expedia for planes, etc. These companies don't own buildings, cars, restaurants or planes, but they make a lot of money by allowing consumers to easily access these things. It's no longer about building infrastructure, it's now about building beautiful, slick, mobile, easy to use 'layers'.

One of the big complaints about these layers (or interfaces) is that many believe that they commodotize the underlying asset. Uber users don't really care which cab company the driver is a part of, they just want the cheapest ride that gets them from point A to point B. This detachment from the brand drives down the cost of the ride and drives down the income that goes to the driver. Uber is commodotizing drivers. And drivers need to think really hard about how they're going to separate themselves from the pack if they want to continue to charge a premium.

Uber's layer is winning the taxi space.

But with the increasing use of mobile and the decreasing use of the desktop web, mobile is quickly becoming a platform on its own. And soon, instead of Uber being the 'commoditizer', Apple's iPhone or Google's Android could easily commodotize Uber.

Let me explain. Today, if I want a ride somewhere I go to Uber or Lyft or Sidecar or some other app to book a ride. This is a bit clunky in that it's hard to know which of the services has the best option for me based on the time of day and where I want to go. I have to download all of the ride sharing apps and scroll through them to find the best deal.

Of course I'm not the only one that's annoyed by this. Very soon (if not already) we can expect that there will be services that will aggregate all of the top ride sharing apps into one so I can pick the best option for me (just like Kayak does for plane tickets).

This would be really bad for Uber. Now they're the one getting commoditized.

But when mobile is a platform, it gets much worse.

Apple and Google could easily add their own layer on top of these aggregation layers. At some point soon, instead of going to the Uber or Lyft app, I could just open up Siri and say, "give me a ride to SoHo". And Apple will scan all of the ride sharing apps or ride sharing aggregators (even if I haven't downloaded them from the App Store) and deliver the best result. This is absolutely what Siri wants to become -- the entry point to the web.

In an extreme example, I could tell Siri, "take me to my friend's apartment and let's stop somewhere to pick up a bottle of wine that pairs well with Italian food." Siri then decides which ride sharing app, which business directory app, and which wine app to use to bring me the best experience.

Apple could easily cut a deal with a ride sharing aggregator, Yelp and HelloVino (a wine discovery app) and take a fee from each of them. In this case, not only is the Uber driver getting commodotized, so is Uber and so is the ride sharing aggregator.

This is an important issue for any web based service to think about. The new economy might be less about the battle for the most beautiful interface and more about the service that can get closest to the user. And it's beginning to look like platforms rather than interfaces might win the war.

One of my favorite questions to ask when interviewing a potential sales hire is: “given your experience in sales, if you had to write a book about sales, and you wanted to sell a lot of copies, what would be the theme or the thesis or the title of the book, what insight would you bring?”
Much to my dismay, the candidate will often sit back and say something like, “that one is easy, relationships, it’s all about relationships”.

This is a disappointing answer. And it also isn't true. I don’t think it is all about relationships. Especially when selling innovation. People buy from a seller because they think they believe it'll move their company forward or, more selfishly, they'll get a raise or a promotion or a bonus at the end of the year after they roll out the product. They don’t buy from a company because they like playing golf with the salesperson.

That said, for some products it's different. For some products, successful selling is driven by good relationships.

This got me thinking about which products are sold based on relationships and which aren't.

I think a lot of it is driven by the life-cycle stage of the product and the level of competition in the product's vertical. For example, when Salesforce.com when out to sell their first cloud-based CRM product to its first group of customers, it wasn’t about building a relationship. It was about convincing early adopters to completely rethink the way they manage their customer data. It was about getting big companies that were stuck in their ways to make a massive mind-shift. You can't do that with a relationship. You do that with thought leadership and creating a vision and great communication. Of course, it probably didn't hurt if they built a nice relationship along the way but there’s no way that was what was driving their deals at that stage.

On the other hand, when Benjamin Moore sales reps sell paint to a commercial real estate developer, it probably is very much about the relationship. The products are more of less the same, so it comes down to price, and how much the buyer likes the seller.

This chart illustrates my point:

When a product is brand new and innovative, relationships matters less than when the product is mature and commoditized by lots of competition.

Of course, the line is probably not this linear. For the first 1 or 2 customers, relationships typically matter a lot (often these are friendlies) and the importance of relationships probably levels out at some stage of product maturity. But I don't want to over-think the simple point.

It’s worth salespeople taking some time to think about how they sell and whether or not the product they're selling is at the right stage for their skill-set.

You might not want a relationship salesperson selling structural innovation and you might not want a disruptive salesperson selling paint.

I came across thIs chart the other day on Twitter showing camera production from 1933 through 2014.

This chart is great because it perfectly illustrates the good and bad parts of disruption. Better, more portable cameras destroyed the incumbents (Polaroid, etc.). But at the same time these innovations massively increased access to and use of cameras (this is the point that most people miss). It's estimated that there were more photos taken in the year 2014 than there were in all of the years prior to 2014. That's incredible.

The fact is that while disruption can cause some short term pain it almost always results in a greater good for those in the industry. More people travel because of Expedia. More people go out to dinner because of Open Table. More people listen to music because of Spotify. More people get a ride because of Uber. And on and on.

This is perfectly analogous to what needs to happen in healthcare and education. We need the incumbent analogs to go away and the innovators to take over and give access to a lot more people at a much lower cost. We just need the regulators to get out of the way and allow it to happen.

Fred Wilson, the well-known venture capitalist, wrote a blog post last week with some technology predictions for 2015. He touched briefly on healthcare:

the health care sector will start to feel the pressure of real patient centered healthcare brought on by the trifecta of the smartphone becoming the EMR, patients treating patients (p2p medicine), and real market economies entering health care (people paying for their own healthcare). this is a megatrend that will take decades to fully play out but we will see the start of it in 2015.

All of these predictions are spot on, of course -- the patient will become more and more in control of their care.

But if you talk to the people on the ground you'll find that these things aren't really being talked about or worked on at the provider level.

Case in point, John Halamka, the CIO of Beth Israel Deaconess Medical Center, considered one of the most innovative thought leaders in healthcare technology, wrote a post the other day reviewing some of the key health IT issues on his plate during 2014 with some predictions for 2015. In short, he's focused on implementing software that will facilitate accountable care workflows inspired the Affordable Care Act; meeting government electronic medical record adoption standards (Meaningful Use); and complying with government regulations around the protection and security of personal health information (HIPAA).

These are very different things than the things that guys like Fred Wilson are thinking and talking about. Venture Capitalists are completely focused on the patient. Real world healthcare operators (CIOs) are primarily focused on meeting government requirements.

This disconnect -- or, at least, that degree of separation from the patient -- isn't the fault of CIOs; they have no choice but to focus on the urgent and intense demands coming from the government to ensure that they continue to receive government incentives and avoid penalties.

Venture Capitalists are focused on where healthcare technology and the patient are going (e.g. where the money will be). Given the intense regulation, health system CIOs don't have that luxury.

All of that said, for the most part, I think government intervention into healthcare IT has been a good thing. Healthcare execs are totally focused on efforts to increase quality and reduce cost. Most stakeholders (providers, payers, regulators) have gotten behind value based care payment models -- the winds are all going in that direction. And providers are now fully onboard with electronic medical record adoption (at last check ~80% of providers are using them). None of this could've happened this quickly without government intervention.

But now that the groundwork is laid, it's time for the government to back off a bit and let the market start to drive more of the innovation in healthcare IT. Providers need the room to move their businesses and IT investments away from meeting the requirements of restricting, top-down government initiatives and closer to providing tools that are centered-on and built around the needs and desires of the patient.

The other day I was talking to a founder of a B2B software startup about how hard it is for big companies to buy things. Even at a super low price point (a couple hundred bucks a month) software purchases still have to go through a litany of approvals.
I was telling her how almost exactly two years ago I wrote a post titled, Individual Employee Budgets, where I predicted that employees would have their own discretionary budgets that could be used to buy things that would make them more productive and profitable employees. With the growing trend towards the consumerization of enterprise and the ability for anyone in their basement to build and distribute a great productivity application to millions of employees, individual budgets, I thought, would be a requirement for companies to succeed and retain employees. For smaller purchases, traditional procurement eventually has to get out of the way.

I still believe this will happen, but it's moving much slower than I predicted.

That said, two years after writing that post, when I think about the software I use to get my job done, much of it is 'consumerized'. That is, it's sold directly to me and in order for me to use it my company doesn't have to go through a painful procurement process. Software like Wunderlist, Google Maps, TripIt, Sunrise, Feedly, Evernote and Google Docs, to name a few. There are only a couple of applications that I use that were procured through a traditional procurement process -- and most of those aren't as useful or as easy to use as those that I procured myself. Self-service software has to be really, really good as the switching costs are near zero.

It's disappointing that the way companies buy hasn't become more flexible as enterprise software has become more consumerized and easy to procure. Employees are ready for self-service productivity tools and software makers are ready to build and distribute them. The only thing we're waiting for is for big buyers to let it happen.

I read Peter Thiel's new book, Zero To One, the other night. I highly recommend it. It's a quick read (about 240 pages) and is full of great insights on startups and growth. He talks about the fears that the public has over technology. At one time, everyone was afraid that globalization was going to take all of America's jobs because there'd be someone overseas that would do our jobs cheaper than we would. Instead, American jobs have simply transformed. While's there's always some short term pain caused by a transforming economy, unemployment isn't all that much different than it was 20 years ago. The new fear is that software and technology will take all of our jobs. Thiel points out that this is a myth as well. See this excerpt:

Now think about the prospect of competition from computers instead of competition from human workers. On the supply side, computers are far more different from people than any two people are different from each other: men and machines are good at fundamentally different things. People have intentionality—we form plans and make decisions in complicated situations. We’re less good at making sense of enormous amounts of data. Computers are exactly the opposite: they excel at efficient data processing, but they struggle to make basic judgments that would be simple for any human. To understand the scale of this variance, consider another of Google’s computer-for-human substitution projects. In 2012, one of their supercomputers made headlines when, after scanning 10 million thumbnails of YouTube videos, it learned to identify a cat with 75% accuracy. That seems impressive—until you remember that an average four-year-old can do it flawlessly. When a cheap laptop beats the smartest mathematicians at some tasks but even a supercomputer with 16,000 CPUs can’t beat a child at others, you can tell that humans and computers are not just more or less powerful than each other—they’re categorically different.

I love this. There are things that humans can't do as well as computers and things that computers can't do as well as humans. There is now and will always be a ton of opportunity to do things that computers can't.

I've written about this a bit in the past with regard to sales tactics, but I'd like to discuss this topic from a broader perspective. Here are some thoughts on competition:

When a company starts or a product launches, you'll often hear talk about how they're "better than the competition." This is a bad approach. It minimizes the product's unique value.

With the exception of super mature, commodity-based industries, there is no such thing as competition. Each company has built their product in their own unique way and others have built their products in their own unique way. If there is real competition then the product isn't unique.

Companies should be bold about what their product doesn't do or does do poorly. It's not good at doing X because the company hasn't prioritized X. And that a good thing. What a company decides to prioritize and deprioritize is what places them in a non-competitive space.

For the most part, companies shouldn't stress out about keeping secrets from the competition or trying to figure out what their competitor will do next. They should watch what others are doing so that they are experts on their own space and they should look out for new ideas but the vast majority of energy should go back into their own product and story.

Andy Grove said "only the paranoid survive" but this shouldn't be translated to mean that companies should be paranoid about their competition. They should be paranoid that their product isn't unique and that if it is unique that customers aren't interested in that uniqueness. Companies should obsess about their own product and their product's story.

Basic economics tells us that the market is trying to get prices down to zero marginal profit. Companies that are in competitive industries quickly get to zero profit.

Companies should be bold that if a buyer is looking for X-feature and their company doesn't prioritize X-feature, then the buyer shouldn't buy from them. And if the company knows someone else that does X-feature well, they should recommend that company.

When I worked in e-commerce, people would ask me about our competition. My answer would always be that we have no competition. There is no other company addressing the problem that we solve in the way that we solved it. Of course, if you're asking if there are other places to shop online then there are tons of other companies. But none of them are competitors. They're solving a different problem in a different way. Great companies compete in an industry of one.

I heard that Peter Thiel talks extensively on this topic in his new book, Zero to One. I haven't read it yet but plan to in the coming weeks.

Vinod Khosla interviewed Larry and Sergey from Google a couple weeks ago. I recommend watching the entire thing when you have some time.

[youtube https://www.youtube.com/watch?v=Wdnp_7atZ0M&w=560&h=315]

At one point Larry explains the fact that the average Fortune 500 CEO's tenure is approximately 4 years. He notes that it's really, really difficult to solve big problems in 4 years. Twenty years, maybe. But 4 years, no way. So as a result we have a system where our largest companies are acting in a way that is very short-sighted.

We all know the stories of the giant, successful companies not seeing how things were changing and ignoring the little upstarts only to eventually get toppled by them. We've always chalked this up to naivety and arrogance on the part of large companies. Polaroid is a great example. They ignored the digital camera and didn't recognize what its impact would be until it was too late and eventually found themselves bankrupt.

But when you consider Larry's point, that CEOs are only focused on 4 years out, you can see how it actually made sense for Polaroid's leadership to ignore the digital camera. New innovations move slowly, the best thing for Polaroid's stock price (in the short-term) was to continue to focus on their core business -- not to pivot and get ahead of a trend.

We're about to see the same thing happen to big car companies. Self driving cars are the future. And they're going to operate much differently than the cars we have today. But it'll take a while, maybe 10 or 15 years. If you're the CEO of Ford or General Motors, why should you redirect your resources away from regular cars, if you're really only worried about the next four years? You're much better off focusing on the here and now. Very logical, but also the thing that will wipe them out of the self driving car business. We can see it right now, it's going to happen, but they won't do anything about it.

I'm not arguing that companies should have 20 year terms for their CEOs, but companies do need to recognize that their short-term focus paralyzes the company in dealing with trends and getting ahead of the small upstarts. Companies would act very differently if they were looking further around the corner than the tenure of their leaders allows.

There’s been quite a bit of talk in the blogosphere over the last few weeks about the death of the IPO. Most notably here and here. Most are blaming the paralyzing regulation that came along with Sarbanes Oxley following the financial crisis. They're pointing to the fact that Uber, Airbnb and Dropbox recently raised private financing at $10 billion plus valuations. And that Twitter waited until they were worth $25 billion before going public. And that Facebook waited until they were worth $100 billion before public.
The problem with this is that most of the uptick in these valuations was missed by the average investor (U.S. law prohibits non-accredited investors from investing in private companies).

There’s definitely a problem here. And it's terrifying to think about what Washington might try to do to fix it.

But rather than focus on the unfortunate aspects of the growth of these companies, I thought I’d focus on the good. Seeing these companies lumped together made me realize that these companies are all adding significant value to the economy, regardless of how they're funded.

As the global economy continues to transform and push out jobs that can be automated or sent offshore, these companies are doing the opposite -- they're creating massive numbers of new jobs that can't.

AirBnB has turned close to a million homeowners into part-time landlords (many of them in the U.S.). Uber has turned every street corner into a cab stand and in the process has created hundreds of thousands of near six-figure jobs.

Some might argue that these companies are just transferring hotel jobs and cab driving jobs to someone else. Not true at all. In industry after industry we've seen that as it becomes easier and more convenient to transact, more people get in the game. More people are traveling thanks to AirBnB and more people are hitching a ride thanks to Uber. These companies are growing the pie and helping the economy in the process.

There are lots of other marketplaces that are creating freelance sources of income (Clarity, Angie's List and Google Hangouts to name a few). And I wrote about the enormous number of jobs that the iOS and Android marketplaces created a while back.

There's no doubt that most Americans are missing out on the big equity gains coming from these hyper-growth startups, but the jobs that these companies are creating is potentially far more impactful. And seeing new technologies create net new jobs in the short-term instead of wiping them out is a trend that shouldn't go unnoticed.

The recommendation notes that virtual visits can be used for first time provider-patient encounters (a 180 degree turn from their prior position where they recommended that telehealth only be used once a relationship has been established). This propels telehealth companies deeper into the patient acquisition business.

To qualify as a telehealth visit, the board requires that the encounter be done using video (as opposed to just audio). Phone-based telehealth companies won’t be eligible to provide telehealth based on the updated recommendation. Nor would the board recommend that those visits be eligible for reimbursement.

The news is being reported as both a big step forward for the industry (initial consults can move online) as well as a big step back for the industry (it limits vendors' ability to provide services to patients that don't have internet access). Regardless, it's nice to see this channel becoming more officially recognized and sanctioned. For some segment of provider-patient encounters telehealth will lead to better outcomes and significant reductions in the cost of care.